The annual global confidence survey from the National Venture Capital Association produced an unusual apparent contradiction.

Investors around the world think the U.S. is the best place to back startups but confidence in our country's government among domestic VCs is dropping.

Bobby Franklin, who took over as CEO of the national venture group this year, offered his thoughts about the situation in an exclusive interview with me.

Basically, the domestic view comes down to disappointment in how close Washington came to enacting meaningful immigration and patent reform only to fall short.

The global confidence, he said, is the result of the one recent situation where Congress passed one of the venture community's big agenda items — the JOBS Act of two years ago.

The following transcript of my conversation with Franklin has been edited for length and clarity.

This survey seems like a classic "good news, bad news" situation, doesn't it?
Clearly the survey shows that ventures investors from around the globe are showing increased confidence in investing in the U.S. for the last several years and continued again this year. That’s obviously great news for the entrepreneurial ecosystem here in our country.

The interesting piece to us is that even with those very high confidence levels — higher than global investors have in any other country — U.S. investor confidence in our own government was way, way down.

It feels like these two extreme numbers are pulling against each other. It certainly begs the question: If confidence was higher in our own government’s ability to pass laws, rules, regulations, taxes, etc., that are more favorable to the entrepreneurial ecosystem, how high could that high global confidence number get. It might get very close to a perfect score of five.

Another question it begs is whether the government is actually relevant to the entrepreneurial system, doesn’t it?

Certainly from a broad macro level that might be true. But if you start to kind of peel the onion back a bit I think you will see that with the highest confidence factors in the survey are around the software sector — whether it's cloud, software as a service, mobile, healthcare, IT or enterprise. Those sorts of things to a large degree are less affected by U.S. regulators and government policy.

But there are some sectors at the lower end of the confidence scale in the survey, life sciences for example, where government plays a larger role. That isn’t found in this survey but it is something we watch in other data that we track.

There has been a drop in first-time funding for life science companies. We have had NVCA members come to Washington to testify that a lot of the resources from their funds focused on life sciences are going to companies that are starting in other countries. I think that that’s where people were a lot more opinionated as they answered the survey because they are so directly impacted.

Another question that occurs to me concerns the consolidation there has been in the venture industry. There are a lot fewer investors than in recent years. Could some of the higher confidence be that these people you are measuring are the happy survivors of this consolidation?

I am in my first year in this role. So I am learning a lot as I go through this year. But certainly anecdotally as I talk to members about this a lot of them think this contraction that we have seen in the industry is very healthy. So I take your point, which is that perhaps the survivors have a reason to be optimistic.

But at the same time our recent fundraising numbers show an increase in the number of funds that have been raising dollars. I can’t make a prediction yet about whether we have turned the corner and started to grow again. But I certainly know that a strong IPO market and favorable capital markets are providing exits that give our members the opportunity to return dollars to their limited partners. That is making people more willing to invest in funds going forward and that can certainly lead to more confidence.

Are there specific issues that your members are losing confidence in government on?

Obviously with all the work that’s been done on immigration reform and how important that is to the entrepreneurial ecosystem, that’s one.

You feel like you run down the field and you are a yard from the end zone. But you are not able to get the ball across the goal line. I think that does a lot to take confidence in the government down for many folks in this industry.

Why is immigration reform important to the venture economy?

There is a very high number of foreign born entrepreneurs that start companies in this country. There is also a very real need for newly created companies to find the talent they need to scale up and grow. But unfortunately we just don’t have enough talent here in our country.

That gap could be filled with immigrants — particularly those that we educate here. We give them their diploma and then we say, “Thank you very much. Now you have to leave.”

That’s not a very good environment for an entrepreneurial ecosystem that needs this talent.

We worked hard at the NVCA to get provisions in the Senate-passed comprehensive immigration reform bill. We want to provide opportunities for immigrants who are here and actually get some venture funding. We think they ought to be in a class of their own. If somebody is investing in them to start a company which helps the U.S. economy and which grows U.S. jobs, why shouldn’t they have the ability to stay in this country legally?

That’s a real impact. I think all of the attention that’s been given to immigration reform and having it get so close, but yet so far, would certainly be a factor in how folks answer the questions on the survey.

Another is patent reform. A lot have worked on patent reform and at NVCA we have been trying to be the voice for young startup companies on the issue. Sometimes that company is impacted by the so-called patent trolls, but that company may also be on the other side of the larger debate about how to protect its intellectual property. Sometimes that’s the only thing that it has as a startup.

Again, as with immigration reform, there has been a lot of activity, but they didn’t get it across the goal line. That certainly takes the wind out of the sails for confidence in the government being able to enact the right sort of policies.

What other unresolved issues are out there that the VC community is paying close attention to?

There are a number of other things. There is a lot of activity around net neutrality and the concerns that Federal Communication Commission could make changes that could disadvantage startup companies.

I mentioned life sciences — and just sort of thinking of it in the overall medical innovation category — there is work being done in Washington. There is something called the 21st Century cheers initiative that folks in the House of Representatives are taking up to really think about how can we ensure that medical innovation continues to drive and flourish in this country. And that’s a broader question about what sort of process is at the FDA to have both drugs and medical devices and bio companies. We had the ability to get their products or devices approved. Many times it's so unpredictable and the time in which it takes they are simply just not starting those companies here. We are starting them in countries that have a more predictable time frame to get an answer and so the whole medical innovation you know there is a story we talk to policy makers about how there is data now to show that these companies are being formed overseas as a direct result of the regulatory tax environment we have in this country.

So, let's use this as the learning opportunity to get those right but also to think about how you cannot take for granted that the innovation economy will always be at the center of the universe here in the U.S. So, although we have all this great confidence in this global survey about investing in the U.S. there is a sector in this economy and in the entrepreneurial ecosystem that’s really seeing no pain point and then you can’t take it for granted that it will always be there. We have to get those policies right and we have to, you know when we spend all this time here in Washington working on it, we have to get them across the goal line.

Have there been any wins this year as far as policies that have been enacted that are beneficial to the venture community?

This year it's hard to point to any. But a real example was a couple of a years ago with the passage of the JOBS Act. The IPO market had a serious bottleneck. The JOBS Act put some common sense provisions in place so that we could get the IPO market moving again. That is an example of the benefits that come when Washington gets it right and how that helps. That’s probably a big contributor to the global confidence number in the U.S.